The 2016-17 Budget and Your Income Taxes - FundsIndia.com

The 2016-17  Budget and Your Income Taxes

By Ms. Bhavana Acharya, FundsIndia.com

The Budget 2016-17, apart from tinkering with taxation rules on retirement products, has not made any changes to tax slabs or / rates. But, for some individuals, there are small changes that can make quite the difference to the total income tax outgo.

Bhavana Acharya
Mutual Fund Analyst
 FundsIndia.com

Super rich :  15% surcharge..!

First, the bad news. The super rich have plenty to gripe over in this Budget. For those whose income is above Rs. 1 crore, the 12% surcharge they used to pay has now been hiked to 15%.

This apart there have been cesses or / duties levied on certain luxury products, which will send their bills higher. The rich, therefore, will suffer quite an impact.

Traders also have something to moan about. Securities transaction tax (STT) on sale of options where the option is not exercised will move up to 0.05% of the option premium, from the 0.017% it had been until now. This rule will take effect from 1st June, 2016.

Good news smaller imcome tax payers..!

But, here’s the good news!

This involves only smaller imcome tax payers, though. Existing provisions allowed rebate of the entire tax paid or / Rs. 2,000, whichever was lower, for individuals whose income was under Rs. 5 lakh. This rebate amount has been hiked now to Rs. 5,000.

First-time home buyers..!

First-time house buyers will now be able to claim an additional Rs. 50,000 on their home loans. Section 24 of the Income Tax Act already allows Rs. 2 lakh in interest payments on self-occupied properties.

The extra deduction will carry through as long as the loan re-payment continues. There are a few caveats here though.

One, the loan amount should not exceed Rs. 35 lakh. Two, the property value should also not be more than Rs. 50 lakh.

Three, the loan has to be sanctioned between April 1, 2016 and March 31, 2017. Of course, this may be extended beyond if the scheme proves successful in furthering the Government’s aim of housing for all.

Incentives provided to Promoters of affordable homes..!

Incentives provided to developers of affordable homes combined with the extra deduction for home buyers can, in fact, deliver some boost to this goal.

Section 24 also has a clause amended.

For loans taken to construct or / acquire house property, the construction had to be completed within three (3) years from the end of the financial year in which the money was borrowed to claim the deduction of Rs. 2 lakh. This period has now been extended to five (5) years given that property construction often drags on due to delays.

Those who are paying rent do not need to feel left out, though. Individuals who do not receive house rent allowances (HRAs) from their employers but who pay rent are currently allowed a deduction under Section 80GG. The rent paid in excess of 10%of their total income is allowed as a deduction, subject to a ceiling of 25% or / Rs 24,000 a year, whichever is less. This has now been increased to Rs. 60,000 a year.

In simple terms, from a maximum of Rs. 24,000 a year, you will now be able to claim Rs. 60,000 as your rent deduction even if you do not receive house rent allowance.

All these provisions come into effect from the Financial year 2016-17 and assessment year 2017-18.

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